Fiscal Consequences of Concentrated Poverty in a Metropolitan Region

Abstract

Poverty concentration has a significant negative effect on the fiscal health of cities in that it increases spending on antipoverty programs and also raises the cost of providing more general public services such as police and fire protection. Spending patterns among Southern California cities over the last two decades show that poverty strongly influences local public expenditures after controlling for demographic, institutional, and fiscal characteristics of cities. Moreover, the fiscal burden of poverty has increased more rapidly for general expenditures than it has for antipoverty programs per se. Because the general service impacts of poverty are typically uncompensated under state and federal fiscal policies, poor cities experience significantly higher uncompensated costs and face growing fiscal pressures. These pressures reinforce patterns of poverty and inequality within the Southern California region and likely fuel exurbanization and environmental degradation.